A share of stock with a beta of .74 now sells for $50. Investors expect the stock to pay a year-end dividend of $3. The T-bill rate is 5%, and the market risk premium is 8%. a. Suppose investors believe the stock will sell for $52 at year-end. Is the stock a good or bad buy? What will investors do?

The stock is a good/bad buy and the investors will/willnotinvest? .

b. At what price will the stock reach an equilibrium at which it is perceived as fairly priced today? (Do not round intermediate calculations.Round your answer to 2 decimal places.)

Stock price $